Government Imposes $500,000 Executive Pay Cap On Bailed-Out Companies

By alexchasickFebruary 4, 2009

President Obama and Treasury Secretary Tim Geithner have announced a $500,000 maximum wage for employees of companies that receive taxpayer support. The rule will only apply to companies that receive future bailout funds. Oh, also, you’re going to be bailing out more companies.

In his remarks, President Obama attacked “executives being rewarded by failure,” and argued excessive severance packages and bonuses for companies receiving federal money were in “bad taste.” Bailed out companies will be required to disclose and justify perks and bonuses to taxpayers.

Responding to Obama’s plan to “take the air out of their golden parachutes,” a business consultant said:

“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus. And you know these companies that are in trouble are not going to pay much of an annual dividend.”

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@TheRedSeven: Just wait until tax revenues in NYC/NY State start to decline. Who do you think will end up being on the hook to make up for it? You think Bloomberg is out of control now?-You ain’t seen nothin’ yet!

In addition, what is to stop firms from other countries from swooping in and enticing these folks into leaving the country by offering them sweet deals on compensation packages? The resulting “brain drain” is NOT going to help us climb out of this recession/depression/whatever term is the current flavor of the day.

@jamar0303: Of course other countries can “have” the scoundrels that were responsible for this mess. My point is that not everyone working in this industry is a crook (hard to believe, but it’s true) and that Draconian knee-jerk actions like this WILL have unintended consequences which will undoubtedly trickle down to all of us in some form or another.

@yeabirfday: I was not referring to supply-side economics with my comment. I suppose I should have used a term other than “trickle down”. I simply mean that the “average” person is going to be squeezed even harder once public revenues begin to decline in response to this policy. Taxes will increase, there will be more regulation and interference in people’s lives (many new opportunities to be fined for noncompliance), and rising unemployment in service and especially luxury industries (which will put further strain on public funds, a nice little positive feedback loop).

What I meant was simply that this policy is Draconian and risks throwing out the baby with the bath water. Clearly, significant reforms are needed in terms of compensation in this industry, but these reactionary policies risk overcorrecting the situation. We need competent, skilled, ethical, and intellegent people on Wall Street; in recent years this sort of individual seems in very short supply, and arbitrarily putting a cap on personal earning potential will definitely NOT help in attracting such individuals. What is actually going to happen is that there will be an even bigger incentive to “game” the system and exploit the loopholes, and the ethically-challenged among them will likely be the most skilled at perfoming these manipulations. The end result is a more hostile environment for those folks that actually DO want to conduct their business ethically, so the scoundrels will still basically run the show.

I’m 100% in favor of more accountability and transparency. A much more reasonable solution to the compensation dilemma would be to go through the current tax code and close some of the loopholes that these folks have been exploiting for so long (but of course neither republican nor democrat would go for that-BOTH parties are owned by this demographic, and none of our “leaders” have the testicular fortitude to go down this road…)

@pb5000: To which I reply, yay for the limit, but wtf at the high price. That’s not punishment. Punishment is forcing them to work for free and if they manage to not be prats for the next few years they get to forcefully leave their position with no compensation or punishment. If they actually make things better they keep their job and then get a $500k limit salary. However if they screw things up more they go to state pen, for 20 years. How’s that for an ultimatum? You can quit now, or take the deal and risk a prison bum rush. Pun intended. One guy screwed up the lives of thousands of people, multiply that by several guys and several hundreds of thousands of people and you have what we would call the potentially the biggest bank cockup in history.

Let’s put it this way. Say at my job I steal money, cheat people, overcharge customers, then lie about it when questioned, then my employer/government finds out… I GET FIRED and possibly sued, fined, and sent to jail! However if you’re a CEO, you get to keep your job, get a bonus, a jet, a bailout, and still lots of money.

WHAT PART OF THIS MAKES SENSE TO ANYONE!? What isn’t corrupt in this freaking country and why won’t consumers stand up and do something? This won’t fix anything. They all need to be fired and prosecuted.

Don’t most places pay their execs like $1 a year in salary, and the rest in other perks? I don’t remember where I read it, but it made sense. Saves the exec and the company on income and SS taxes. I’m sure they have to pay out some tax on the perks, but not as much.

@torgonius: No. A founding CEO’s who have massive amounts of stock do this but generally non founding CEO’s want truckloads of money. It’s a uniquely American thing to have CEO’s who make enormously more than their employees. Many other places have slightly more reasonable compensation.

Ration of executive pay to worker pay is Japan was 17:1. USA is 31:1 on average.

@Jon Klein: The problem is that as currently structured, it can incentivize execs to pursue short-term bursts of growth at the expense of long-term profits and sustainability.

@kingmanic: One proposal that’s kicked around, including by Obama when he ran for Senate in IL, is the idea of a “Patriot Corporation” which would, among other things, onshore X% of their “critical” operations and cap their highest salary at some multiple of their lowest full-time salary. (And provide certain benefits to all employees meeting certain criteria.) In exchange, they would be eligible for tax breaks meant to stimulate US growth. Because it’s really pretty freaking stupid to give companies breaks on US taxes to offshore everything and make profits for a few top executives at the expense of American jobs, American workers, and the American economy.

I think this is an excellent idea, because it creates incentives to conform to these more sensible standards without mandating them, and it limits certain tax benefits to companies who provide an economic benefit to the US in return.

@Jon Klein: Actually, people like Jobs don’t usually get additional stock. Jobs owns a huge chunk of Apple stock, therefore anything he does to make the stock go up is directly good for him. But he does not, to my knowledge get stock options, or new stock. His total compensation really is exactly $1.

This is the advantage of companies run by large stockholders over companies with a board that picks someone whose financial interest is really just in getting as much cash out of the company as he can.

@JustThatGuy3: What exactly does the CEO do? From what I’ve seen, becoming CEO is like being a quarterback in the nfl. Even if you fail, chances are someone else will hire you just because you were a CEO. Sure, you’re “in charge” of the whole company, but what does that really mean?

We’ve seen CEO after CEO dart and dodge their way out of responsibility for any decision they made while in office, the ones that commit crimes amounting to armed robbery (Enron) practically walk away with a slap on the wrist.
Pretty much all they do is talk. The biggest risk is getting fired and crying your way home with your golden parachute.

That said, most CEO’s are amazingly charismatic and most people can’t be blamed for falling for their BS hook line and sinker.

@dwarf74: These aren’t the people that made poor decisions. Most of them have already been removed or have resigned. Struggling companies already have removed many bad apples and now need to attract top talent to fix their problems. Publicity stunts like this one only inhibit that. I thought the election was over, can’t Obama quit campaigning?

@downwithmonstercable: Most CEOs do not make the money for the company. They merely go with the flow…There are exceptions to every rule and I think Apple is one of them. He did lead properly and it shows with how well the company is doing. Apple isn’t failing and they don’t need a bailout. Companies that are failing and need to receive a bailout should not be allowed to pay their CEO more than $500,000. Which BTW is a TON of money. I work my butt off for 1/10th of that a year.

@yagisencho: In comparison to what CEOs make for companies of that size, that isn’t very much. Of course those are companies who could sustain on their own and not rape the tax payers so they can continue to live in luxury. So yeah the CEO’s companies who couldn’t run their own business without a HANDOUT surely cant deserver more than $500,000 a year.

I’m going to have to slightly agree with that consultant. Unless there is some wiggle room for bonuses when the CEO improves the condition of the company, this is going to drive away a lot of prospective people. You have to pay for the best. Not that these ridiculous salaries and bonuses for driving the banks into the ground are OK, but when it comes down to it, you need to spend money to make money.

@downwithmonstercable: That’s the thing, though. The CEO doesn’t improve the condition of the company out of his own freaking wallet, he improves it out of the companies profits. So it doesn’t really matter if the bastard is making 500k or 1mil, he is definitely not going to give up any of his money. We’ve already seen that close to NO CEO is willing to help out their company, (though I think I’ve seen one or two stories of CEO’s or presidents that have, I could be wrong).

@TheJinManCan: I’m not sure if I understand what you’re saying. What I am saying is that paying someone $500k is probably not enough to attract top talent. But when you give incentives likes bonuses for improving the stability and performance of the company, that would help attract those types of people who will work to get it.

@downwithmonstercable: What the fuck is “Top Talent?” Does “top talent” have 10+ yrs experience running a financial firm of comparable size? A masters in finance from a major university? An exceptional raquetball player?

As it’s been said elsewhere on this board, the CEO can only point a company in a direction they aren’t the one’s out generating any revenue the mongloids below them are and they’re making FAR LESS than $500k/yr!

Maybe part of the problem is that the candidates are “Professional Executives” that leap frog from Corporation to corporation like an aging veteran in the NFL (maybe they help, maybe not but it will excite the fan base).

Instead they should staff these positions with “Finance/Investing Experts that have risen through the ranks to earn their spot at the head of a company because they understand how it works from the ground up.”

@downwithmonstercable: The top payed ones did no better than the ones paid less. It seems those prospective people were all under qualified. Maybe re-organizing executive compensation might trim the amount of useless people leading companies.

So all these millions we currently pay of bought us “the best”? The ones that have driven up gas prices with speculation, made substandard loans, and run companies into the ground, just to turn around and ask for handouts from the same people they are screwing over?

@Saboth: Whoa whoa whoa…let’s not get carried away. I didn’t say anything about “the best” making substandard loans, dealing with speculation, etc. You are putting words in my mouth. I get what you’re saying. There’s good and bad to every idea in the world from business to politics. But the basic idea is that if you don’t pay well, you don’t get top talent. I think we can all agree with that. A good CEO making $10 million with a solid track record and continued good performance probably won’t leave his job to make $500k to revive a bank on life support.

@downwithmonstercable: I’d be with you on this one if there were any evidence that CEO pay were related to performance. But there isn’t. CEOs who get paid millions still run their companies into the ground, then get multi-million-dollar golden parachutes when they’re let go.

@downwithmonstercable: The financial field is so specialized that I wouldn’t see a CEO coming from any other field to help out anyway. With almost everyone in the same shape in the banking industry, there aren’t many who will be making a boatload of money otherwise. It’s not like high tech execs are running over to help out.

@downwithmonstercable: I would usually agree with you but as far as I am concerned the executives of any company that had to be bailed out by the feds should have his income confiscated, not earning millions of dollars from the taxpayers.

@nicemarmot617: If a bank, or anyone for that matter, lends you money you agree to terms at the time the loan is made. You don’t get to add or change terms after the fact. That is basic basic contract law.

@Shadowman615: Random rant? No, you can’t change the terms of a loan after the loan is granted. Loans were made and now Obama wants to change the terms, if I were advising the impacted companies I’d sue.

@downwithmonstercable: If the CEO thinks he/she will improve the company, why not use company stock options to buy a bunch of stock. Then they will be rewarding themselves by improving the profitability of the company.

@downwithmonstercable: The problem is that, as others have mentioned, the most of the top paid ceo’s have been the worst ceo’s.

I also think this is part of the reason CEO’s salaries get outragous. Its because noone ever wants to take a chance on someone from the board or a VP. They rather keep poaching “known quantities” from other companies and pay out the nose.

Perhaps I am naive, but it seems that there would be someone in the company with the drive and skills needed to make it succeed. They would do it knowing that if they are successful they will have a big pay day and a well known name once things are turned around.

@Tmoney02: I think they were the worst because they got to the top, and had no accountability. If they get a “low” salary coupled with the ability to get bonuses, that will force them to work to improve. That’s my thinking anyway.

It actually makes sense if you think about it for a second. Let’s say you’re a CEO. You founded your own company, you’ve been amazing successful. You’re making $5 million a year and everything is just going swimmingly. Now there is a troubled company that wants to hire you help them get out of their mess (i.e. performing poorly). How much money will you require?

@z4ce: Who said that you had to give up your 5 mill to help the other company? The nice thing about starting your own company is that you actually own the company and unless you get bought out, you can make money off it without actually doing anything.

To answer your question though, I would like to think that I would be reasonable when asking for compensation. I would expect enough to get by, depending on the company also.

I would also like to think that a company looking for help would look for a CEO who has the best interests of the company in mind. One of the interests being not bleeding the company dry in a time of trouble with their own compensation. That said I would expect tremendous bonuses should I turn the company around. Otherwise, my salary will do.

What wouldn’t be a bigger mark on a bio than, “Successfully turned around a failing company that required government assistance to stay afloat. Repaid the taxpayers in record time and actually earned my bonus”

@ViperBorg – Facebook is the new AOL.: someone else made this point as well. many if the managers under whose watch these companies performed poorly are already out. The compensation cap would apply to the people who are trying to dig out of the mess.

@chortik: Who cares who’s getting it? 500k is still a shitton of money. it’s still a shitton of OUR money. These managers haven’t made money yet. If they have made money they haven’t paid back the tax payers yet.

Don’t take my money if you don’t want to deal with my terms.

I also wouldn’t call 500k a subsistence either. If 500k actually isn’t enough for anyone to survive than they need to seriously question their way of life.

@cmdrsass: This “class warfare” meme has GOT TO STOP. Why is it only “class warfare” when the rich are being criticized or expected to take responsibility or be accountable to their company, to the nation or to taxpayers? The NEXT time someone complains about poor or middle class people receiving “handouts” I will go class warfare all over somebody’s head!

That being said, I’m not sure that mandating a salary cap is the best course of action. I am much more interested in these companies opening their books to scrutiny so that taxpayers know where the dollars are going and for the government to have a plan to monitor performance and make sure we’ll get our money back. On the other hand, these people are kind of dumb handing out cash like candy at a time when their companies are about to go under. I can’t exactly blame Obama for having no confidence in their ability to be prudent or frugal.

No, class warfare is when the IRS audits a higher percentage of poor people who receive the earned income tax credit than it audits people in the top 1% of income. Class warfare is when Jack Welch, as CEO of GE, exploited every loophole designed for the rich and ended up paying the same tax as his secretary.

If you want to learn about class warfare read the NY Times former tax reporter David Cay Johnston’s book “Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich–and Cheat Everybody Else”. If you aren’t sick to your stomach after reading that, you’re not human.

Well, I hope this will cause the companies to NOT seek a bailout using our tax dollars. I’d rather they fail or survive on their own. And if they can survive, they can pay there employees whatever they want.

To those that are against this on the grounds that it will keep them from hiring “talent”, all I have to say to that is that this is an exclusive club, where friends hire friends. Talent has little to do with it. Theres nothing spectacular that these execs have that an MBA grad from University of Florida doesnt have… Other than maybe the experience of already having run a few fortune 500 companies into bankruptcy.. but I digress.

What they really need is fresh ideas, youth, and the balls to approach problems from a new way. What they do NOT need is the same kind of assbackwards, worthless, you-scratch-my-back-I-scratch-yours leadership that has degraded so many companies already. (lets pay 500 million dollars to have our name on a baseball stadium! ok! yes sir! sounds like a great idea sir!) If lowering their salaries means running off what you call ‘talent’ and replacing it with people itching to work, try new ideas, and turn companies around, then I am all for it.

I feel like there is this myth that grew in the last 20 years that somehow a Princeton MBA meant you were exceedingly smarter or more qualified to run a business because the people with these Ivy League educations made boatloads of money as CEOs.

Now that the house of cards has fallen, it seems like more attention would be paid to those who went to less prolific schools, opened successful small-medium businesses, and have kept them alive in spite of an economic crisis.

People like to throw around phrases like “attracting the top talent”, when the ‘top talent’ are a bunch of buffoons who felt entitled to obscene sums of money from business that they did not create.

Entrepreneurs create the jobs in this country, despite what some executives would like you to think.

@Secret Agent Man: It always seemed to me that being a CEO is like being a backup QB in the NFL. No one really knows what you do, but they keep paying you and you keep going from company to company as your contracts run out.

“I feel like there is this myth that grew in the last 20 years that somehow a Princeton MBA meant you were exceedingly smarter or more qualified to run a business because the people with these Ivy League educations made boatloads of money as CEOs.”

I find it unacceptable that they cannot force these restrictions on companies that already took the bailout. They should be able to do something to force them to “opt-in” to it. These financial companies change the terms on consumers after the fact all the time.

I don’t care where you live, 500k will buy you whatever you need and then some. Be it NYC, Cali, whatever, 500k is plenty.

Especially when your job entails leading a failing company that uses taxpayer dollars to prop itself up.

I’d rather see their pay tied directly to profits. Then maybe they would care if they drive a company into the ground with bad decisions. “Oh crap, I am only going to make $2,000 this year…guess I should have made better decisions”.

Well.. I hate to break it to you, but for a senior exec, $500k is terribly small. especially if it is a total compensation cap, versus a salary cap. (Though stock can be a huge motivator..)

But, this provision is soley for companies on the government teet.. not for every company.. I have no problem with this. If you are in danger of loosing everything and on public assistance through TARP, then you should take the cut as part of your survival strategy for the company.

Now.. if they wanted to make a $500K cap for everyone in the country, it would be devestating. Top talent and leadership would bail out of the use and take most industry, and their tax bases with them.

Which means I have no sympathy for these companies. They’ll be taking the bailout money knowing this cap is in place ahead of time. Like nicemarmot617 says below, if they don’t like the rules they don’t have to take the bailout money.

“Companies that have previously received bailout money would have to agree to stricter oversight and prove that they have followed already established restrictions on executive compensation, which are widely seen as being too laxâ€¦”

If this applied to private companies I would object, but it doesn’t. These companies have been nationalized by the bailout and are now subject to federal regulations, including this one. If they didn’t want to deal with more rules, they shouldn’t have taken the taxpayer’s money.

@sebadoh128: It isn’t that the unions are paid too much, its that Chinese slave labor and imported Mexican/Central Americian illegals are paid too little which depressed wages across the board. The unions were the only ones who had it in a contract. By actual time increases in cost of living the minimum wage should probably be about $12 now not $6.75.

And none of the people working for auto manufacturers under a union contract are making minimum wage.

Look, what is good for the Golden goose is good for the gander. If you want The Gov’t to start capping pay for one portion of society, then you can’t complain or be against them capping or at least re-negotiating benefits of another portion of society. This is what happens when you suckle at the teet of the FED.

@econobiker: Sorry, American auto workers that work for foreign companies receive comparable pay, without unions. Their legacy benefits, however, are not as good and they don’t have union owned resorts or silly JOBS banks driving up costs.

I refused to buy into the “ignorant liberal” diatribes against Obama over the past couple years, but apparently those people were right.

There are MANY, nearly an infinite number of covenants we could hold these companies to. But capping exec compensation is one of the worst ideas. Nice way to ensure government-quality talent when private-sector needs are as high as they’ve ever been.

this won’t fall on sympathetic ears. 500k/yr for a ceo position for a firm with 20,000 people on payroll is not a significant amount of money. people who complain that it will take them a decade to make that sort of money are clearly not in an industry that supports that sort of compensation. people who under-perform are regularly rotated out, even top management.

imposing artificial limits on compensation that is not linked to some sort of performance objective will simply drain the talent pool.

@chortik: What talent? Are you seriously saying that the half-million cap will lead to the hiring of a bunch of business morons who will do worse than what was done under the free market?

How the heck do other countries’ economies manage to survive while paying their CEOs so much less? Are Japanese executives demonstrably worse than their American counterparts? How about the Korean ones?

500k would pay off my house and buy me a new car so I could focus on paying off my credit card debt. Anyone whining about having to change their standard of living to under 500k a year needs to get off their high horse and cut back like the rest of the country.

The way I see it is there are plenty of execs looking for work. More than a couple would surely be willing to take this “small” amount and work towards saving the company, after they save them and pay off the govt. they will reap the rewards then.

Dumbest idea ever. Can it get any worse? Get the hell out of business, Obama! Don’t you realize you’re too late, that the jokers who benefit from the golden parachutes have already “landed.” You’ve just disincentivized those capable of fixing the broken companies from joining up.

@Xerloq: Forgive me if you are, in fact, a respected and accomplished economist, and forgive me if you have a true, well reasoned explanation for why this plan is bad for our country. But Obama is basing his decisions on more than gut reactions, which is what most of us are doing here. (Yes, my gut reaction is that it is a good thing. Could I back my ideas up? Of course not.)

If the situation was as clear-cut, black-and-white dire as you are making it seem, then he would not have put this idea forward. He’s got a team of advisers, the best and the brightest in the country (who are not making millions of dollars a year – maybe it really isn’t all about money! hmmm…) looking at the effects of things such as salary caps. Our president doesn’t have the luxury of taking part in stupid publicity stunts. You may not like the reasoning behind his ideas, but that doesn’t make it illegitimate.

@Karita: HA HA! What reasoning?!? Best and brightest? His ‘top-advisers’ can’t even figure out how to do their taxes! His decisions are based on focus-groups and polls, which exploit the entitlement and class-envy that is so prevalent. THAT’s what got us into this mess – politicians who think they can mess with econimic forces to appease the masses.

Why don’t you explain some of the “reasoning” Obama or his advisers have given? Why shouldn’t execs make more than $500K? Why are they good/bad? How does this cap help me, you, or the guy down the street? How will this create jobs? None of Obama’s advisers have shown anyone how these actions are going to affect Main Street America, other than stroking their pride.

Capping a CEOs salary is like telling LeBron James he’s not allowed to score more than 19 points a game because other players deserve to make some points, too!

The situation is pretty clear cut – foster competition and lower barriers-to-entry in the markets. How do you do that? Cut payroll tax, and income tax to put money into the hands of those who can spend it. Cut capital gains to encourage people to invest.

Stop having blind faith in a pretty face that tells you things you want to hear. Ask for explanations.

Thats more than 6 employees making $65,000 a year to replace each moronic CEO. Put the people who know their stuff on top in place of the worthless CEO, people who are hungry and have been evicted from their homes, lost their jobs, and let them try to fix the frigging economy.

Let the CEO understand the company from the ground up, put them in the mailroom making what their companies minimum full time pay is so they get an idea of how it is to be just a figure on some CEO’s balance sheet.

Let us look at a company that employs 20,000 people. It is tottering on the edge of insolvency. The CEO who made $25 million in 2008 now has to make a decision… “Do I cap my salary at $500 thousand and keep my 20,000 people employed, at least for the short term, or do not cap my salary, lay off 10,000 of my people, say it was inevitable?”… hmmm… I have some payments due, so I vote for MYSELF and let the government take care of those 10,000 now on unemployment, but I can make it LOOK like I had no other choice…

It’s quite simple: If you run your company into the ground, and require We The People to bail you out, 1) You don’t deserve a bonus, 2) You deserve a performance pay cut (like the rest of us schlubs), and 3) We The People get to have a say in what you do with that money, and how its management should be compensated.

We The People just lent (or bought) a big chunk of your company. If you don’t like the terms, you are completely free to refuse assistance, and pull yourself up by your bootstraps (like the rest of us schlubs).

Honestly, hearing CEOs complaining about $550k salaries in this horrible economy that they helped create makes me want to line them all up and deliver the most vicious of bitch-slappings ever made by human hands.

Why are CEOs paid a salary anyway? Shouldn’t their income be based on how well the company does? Why don’t companies just reward stock — if the CEO is good, the company does well and he can sell some stock to make some money. If the CEO doesn’t do well, the company doesn’t do well, and correspondingly the CEO doesn’t get as much money from selling his/her stocks.

Salespeople are rarely put on salary because they have no incentive to sell; instead they’re put on commission. It should be no different here.

You know, I hate the idea of a salary cap. Partially, the critics are right, a company needs to be able to attract talent in whatever way they can to remain profitable. But here’s the major trouble: The bailout money wasn’t supposed to go towards business as usual. The banks are in trouble because their assets are tied up in MBSs and they can’t loan like they used to. The expensive money is choking both them and the economy in general.

For them to take the bailout, and then fail to use it towards untangling their assets to make cheaper loans available, well it would be like me using a home equity loan to pay for groceries: I’m going to be right back where I started if I don’t use the money to resituate assets and liabilities that put me in a position to need a loan in the first place!

So, while I don’t like the overall idea, in this context it’s more than appropriate. They didn’t use the funds appropriately (even in terms of their own longevity*) and now they’re due for a big slap across the face.

*Which is what kills me, they shouldn’t have needed any oversight. Should one of those banks used that money to leverage competitive loans, they’d be making a killing right now against those who wasted it, but they ALL wasted it. They just don’t get it, and we’re going to have to force them to save themselves.

To all you “free market” (snicker,snicker) advocates out there saying that this will drive off real talent,horseshit. You need to check into your business school’s refund policy. Consider:

By your logic,no baseball player would ever sign to play professionally because everyone knows that the money that they will make in the minors will be peanuts compared to the real windfall that they will get for making the big club. In point of fact,minor league baseball is often MORE competitive and exciting than the big leagues precisely because the players are less likely to be set for life. They are still hungry and ambitious.(The really good ones would probably play for gas money,but don’t tell the owners).
Same thing for the “talent” that you so admire in these execs. If they are any good at all,they won’t be in the “minors” (pay limited companies) for very long.They will keep striving to make the big $$$ at a company without a cap on wages.

So,from where I’m sitting,a two tier wage scale might just be the tonic that management in these moribund companies need.

BTW- These companies in large part,already have a wage cap in place -The dreaded salary freeze. They put it there themselves,for everyone EXCEPT the top management.

@Snarkysnake: There are plenty of other people in more relevant fields, too, that don’t make huge amounts of money but certainly aren’t talentless or substandard. The heads of mutual insurance companies, the heads of large non-profits, some university professors/heads of universities, federal judges and many, many politicians are up to CEO standards and have relevant experience without offending others with the size of their salaries.

And to add to your general point – for many people, it is about ego, rather than money. For others, it’s about doing good rather than making money – and helping bring this country back from the verge of economic failure is definitely “good.” Maybe some of these CEOs that we have now haven’t lived too extravagantly, and would be willing to take the pay cut because they don’t really NEED the money, and would rather have the respect earned from “doing the right thing.” Yeah, we might lose some talent with salary caps, but there will be plenty of people waiting in the wings to fill their places.

To amplify a bit – Yes, there are plenty of talented people waiting in the wings for a spot to open up.Those people won’t ever get a shot without some movement at the top.(I dare say Home Depot is a LOT better off now that Bob Nardelli is running Chrysler into the ground)

Also, If there are pay caps on the companies that take bailout bucks, maybe, just maybe, the line will get a lot shorter for the companies that are marching to Washington with their hand out. Some of these self styled irreplaceable geniuses will figure a way out of their company’s problems witout getting a federal money drip. Then , and only then will they prove to be worth their pay.

@Snarkysnake: You can “shorten the line” without having to cap salaries – just make a policy that prohibits bailout companies from hiring anyone who collected on their “golden parachute” at a previous company.

I mean, seriously, if I took over a company that was bailed out, turned it around to be profitable again, all I get is $500k? Some of these companies took tens of billions. To say that turning one around, paying back the bailout, and then make money is worth only $500k? That’s ludicrous.

You have to remember that these companies are losing money in addition to accepting the bailout – they’re not going to be paying it back anytime soon. The $500K caps don’t help that one bit.

This kinda proves my point- You wouldn’t take over a company that had been bailed out. If you were any good,you would be one hot tamale on the CEO market. but there is probably someone that they could promote from within to run the place that would consider 500K a pretty sweet deal.

Remember- the problem here is not giving $$$ to people that succeed. It’s handing big $$$ to people that fail…

the biggest misconception in this whole debate is that the banks are given a handout. they were GIVEN anything!!! they have to pay that money back with interest, as well as giving warrants so the gov’t can participate in their growth and should turn a profit on the deal!!! for the record most of these jerks get paid waaaay too much, but the misinformation out there is staggaring as far as what the banks are actually getting

@craptastico: Maybe you have a link to the exact provisions of the bailout, but what you are suggesting sounds unlikely. If banks have to pay back all the money, plus interest, plus give away their profit they would refuse the plan and shut down anyway. None of the millionaires who run banks are going to keep working unless it gives them a shot at becoming billionaires someday.

1) Take bailout loan money
2) Take golden parachute “negotiated” with yoru buddies on the board using all this new cash before bank hits bottom
3) What bank go bankrupt.
4) Watch taxpayers not get their money back.
5) Lots and lots and lots of profit!

Bank – “Hi, I’m Failing Bank. I really need some money, Mr. Government.”
Govt – “Well, Failing Bank. We’d like to help you out. Before we do, there are some rules you need to agree to. Let me get out the book.” *goes to the rule closet*
Bank – *quickly pays execs in million dollar bills*
Govt – “Okay, for one you can’t pay execs more than $500k a year once you get your bailout. Is that okay?”
Bank – “Yeah sure!”

$500k is still way more than the average Joe or Jane makes in a year and much more than many make in a lifetime! If the vast majority of Americans have to cut back why not these overpaid CEOs? Why are we as Americans footing the bill for their lavish lifestyles while our seniors struggle to pay for their prescriptions, the average family pinches pennies to support their children and singles battle to take care of elderly parents? The president of the US doesn’t make this much, why should these clowns who drove companies into the ground be paid this? That number should have been cut even more!

1st – bailouts are not constitutional; 2nd – if we the people, our taxes, are funding bailouts, then CEOs, CFOs and other officers must have their compensation limited to no more than 500K (an arbitrary value picked by arbitrary people); and lastly if we are serious about the state of the union, then for each company that “failed” a real investigation should be conducted to determine if any illegal activity took place and then hold them accountable to the full extent of the law – which is an infrastructure our taxes already pay for.

This is not only useless but, it’s also a HUGE violation of the constitutional limits on the authority of the federal government. This is not Obama’s desire for fairness at hand here. It’s more about setting a precedent whereby he will want to limit EVERYONE’S pay. Don’t doubt me. Obama is a socialist. He has no respect for the private sector or the Constitution that he took an oath to defend.